HB5731 97TH GENERAL ASSEMBLY

LRB097 17701 AJO 62915 b

97TH GENERAL ASSEMBLY
State of Illinois
2011 and 2012
HB5731

Introduced 2/16/2012, by Rep. Monique D. Davis

SYNOPSIS AS INTRODUCED:

735 ILCS 5/15-1202.5
735 ILCS 5/15-1701	from Ch. 110, par. 15-1701
735 ILCS 5/15-1707 new

Amends the Code of Civil Procedure. Provides that a mortgagor has a right to remain in the mortgaged premises as a renter following foreclosure proceedings by paying rent to the mortgagee in possession or the purchaser at the judicial sale. Defines terms. Provides for a mortgagee's notice to the mortgagor of the right to remain in the mortgaged premises as a tenant, terms of tenancy, mortgagor's responsibilities while renting the foreclosed property, rental rate set by the court, responsibility for maintenance of the foreclosed property, and other matters. Effective June 1, 2012.

A BILL FOR

AN ACT concerning civil law.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Code of Civil Procedure is amended by changing Sections 15-1202.5 and 15-1701 and by adding Section 15-1707 as follows:

(735 ILCS 5/15-1202.5)

Sec. 15-1202.5. Dwelling unit. For the purposes of Sections 15-1508, 15-1508.5, 15-1703, and 15-1704, and 15-1707 only, "dwelling unit" means a room or suite of rooms providing complete, independent living facilities for at least one person, including permanent provisions for sanitation, cooking, eating, sleeping, and other activities routinely associated with daily life.

(Source: P.A. 96-111, eff. 10-29-09; 97-575, eff. 8-26-11.)

(735 ILCS 5/15-1701) (from Ch. 110, par. 15-1701)

Sec. 15-1701. Right to possession.

(a) General. The provisions of this Article shall govern the right to possession of the mortgaged real estate during foreclosure. Possession under this Article includes physical possession of the mortgaged real estate to the same extent to which the mortgagor, absent the foreclosure, would have been entitled to physical possession. For the purposes of Part 17, real estate is residential real estate only if it is residential real estate at the time the foreclosure is commenced.

(b) Pre-Judgment. Prior to the entry of a judgment of foreclosure:

(1) In the case of residential real estate, the mortgagor shall be entitled to possession of the real estate except if (i) the mortgagee shall object and show good cause, (ii) the mortgagee is so authorized by the terms of the mortgage or other written instrument, and (iii) the court is satisfied that there is a reasonable probability that the mortgagee will prevail on a final hearing of the cause, the court shall upon request place the mortgagee in possession. If the residential real estate consists of more than one dwelling unit, then for the purpose of this Part residential real estate shall mean only that dwelling unit or units occupied by persons described in clauses (i), (ii) and (iii) of Section 15-1219.

(2) In all other cases, if (i) the mortgagee is so authorized by the terms of the mortgage or other written instrument, and (ii) the court is satisfied that there is a reasonable probability that the mortgagee will prevail on a final hearing of the cause, the mortgagee shall upon request be placed in possession of the real estate, except that if the mortgagor shall object and show good cause, the court shall allow the mortgagor to remain in possession.

(c) Judgment Through 30 Days After Sale Confirmation. After the entry of a judgment of foreclosure and through the 30th day after a foreclosure sale is confirmed:

(1) Subsection (b) of Section 15-1701 shall be applicable, regardless of the provisions of the mortgage or other instrument, except that after a sale pursuant to the judgment the holder of the certificate of sale (or, if none, the purchaser at the sale) shall have the mortgagee's right to be placed in possession, with all rights and duties of a mortgagee in possession under this Article.

(2) Notwithstanding paragraph (1) of subsection (b) and paragraph (1) of subsection (c) of Section 15-1701, upon request of the mortgagee, a mortgagor of residential real estate shall not be allowed to remain in possession between the expiration of the redemption period and through the 30th day after sale confirmation unless (i) the mortgagor pays to the mortgagee or such holder or purchaser, whichever is applicable, monthly the lesser of the interest due under the mortgage calculated at the mortgage rate of interest applicable as if no default had occurred or the fair rental value of the real estate, or (ii) the mortgagor otherwise shows good cause. Any amounts paid by the mortgagor pursuant to this subsection shall be credited against the amounts due from the mortgagor.

(d) After 30 Days After Sale Confirmation. The holder of the certificate of sale or deed issued pursuant to that certificate or, if no certificate or deed was issued, the purchaser, except to the extent the holder or purchaser may consent otherwise, shall be entitled to possession of the mortgaged real estate, as of the date 30 days after the order confirming the sale is entered, against those parties to the foreclosure whose interests the court has ordered terminated, without further notice to any party, further order of the court, or resort to proceedings under any other statute other than this Article. This right to possession shall be limited by the provisions governing entering and enforcing orders of possession under subsection (g) of Section 15-1508. If the holder or purchaser determines that there are occupants of the mortgaged real estate who have not been made parties to the foreclosure and had their interests terminated therein, the holder or purchaser may bring a proceeding under subsection (h) of this Section or under Article 9 of this Code to terminate the rights of possession of any such occupants. The holder or purchaser shall not be entitled to proceed against any such occupant under Article 9 of this Code until after 30 days after the order confirming the sale is entered.

(e) Termination of Leases. A lease of all or any part of the mortgaged real estate shall not be terminated automatically solely by virtue of the entry into possession by (i) a mortgagee or receiver prior to the entry of an order confirming the sale, (ii) the holder of the certificate of sale, (iii) the holder of the deed issued pursuant to that certificate, or (iv) if no certificate or deed was issued, the purchaser at the sale.

(f) Other Statutes; Instruments. The provisions of this Article providing for possession of mortgaged real estate shall supersede any other inconsistent statutory provisions. In particular, and without limitation, whenever a receiver is sought to be appointed in any action in which a foreclosure is also pending, a receiver shall be appointed only in accordance with this Article. Except as may be authorized by this Article, no mortgage or other instrument may modify or supersede the provisions of this Article.

(g) Certain Leases. Leases of the mortgaged real estate entered into by a mortgagee in possession or a receiver and approved by the court in a foreclosure shall be binding on all parties, including the mortgagor after redemption, the purchaser at a sale pursuant to a judgment of foreclosure and any person acquiring an interest in the mortgaged real estate after entry of a judgment of foreclosure in accordance with Sections 15-1402 and 15-1403.

(h) Proceedings Against Certain Occupants.

(1) The mortgagee-in-possession of the mortgaged real estate under Section 15-1703, a receiver appointed under Section 15-1704, a holder of the certificate of sale or deed, or the purchaser may, at any time during the pendency of the foreclosure and up to 90 days after the date of the order confirming the sale, file a supplemental petition for possession against a person not personally named as a party to the foreclosure. The supplemental petition for possession shall name each such occupant against whom possession is sought and state the facts upon which the claim for relief is premised.

(2) The petitioner shall serve upon each named occupant the petition, a notice of hearing on the petition, and, if any, a copy of the certificate of sale or deed. The proceeding for the termination of such occupant's possessory interest, including service of the notice of the hearing and the petition, shall in all respects comport with the requirements of Article 9 of this Code, except as otherwise specified in this Section. The hearing shall be no less than 21 days from the date of service of the notice.

(3) The supplemental petition shall be heard as part of the foreclosure proceeding and without the payment of additional filing fees. An order for possession obtained under this Section shall name each occupant whose interest has been terminated, shall recite that it is only effective as to the occupant so named and those holding under them, and shall be enforceable for no more than 120 days after its entry, except that the 120-day period may be extended to the extent and in the manner provided in Section 9-117 of Article 9 and except as provided in item (4) of this subsection (h).

(4) In a case of foreclosure where the occupant is current on his or her rent, or where timely written notice of to whom and where the rent is to be paid has not been provided to the occupant, or where the occupant has made good-faith efforts to make rental payments in order to keep current, any order of possession must allow the occupant to retain possession of the property covered in his or her rental agreement (i) for 120 days following the notice of the hearing on the supplemental petition that has been properly served upon the occupant, or (ii) through the duration of his or her lease, whichever is shorter, provided that if the duration of his or her lease is less than 30 days from the date of the order, the order shall allow the occupant to retain possession for 30 days from the date of the order. A mortgagee in possession, receiver, holder of a certificate of sale or deed, or purchaser at the judicial sale, who asserts that the occupant is not current in rent, shall file an affidavit to that effect in the supplemental petition proceeding. If the occupant has been given timely written notice of to whom and where the rent is to be paid, this item (4) shall only apply if the occupant continues to pay his or her rent in full during the 120-day period or has made good-faith efforts to pay the rent in full during that period. No mortgagee-in-possession, receiver or holder of a certificate of sale or deed, or purchaser who fails to file a supplemental petition under this subsection during the pendency of a mortgage foreclosure shall file a forcible entry and detainer action against an occupant of the mortgaged real estate until 90 days after a notice of intent to file such action has been properly served upon the occupant.

(5) The court records relating to a supplemental petition for possession filed under this subsection (h) against an occupant who is entitled to notice under item (4) of this subsection (h), or relating to a forcible entry and detainer action brought against an occupant who would have lawful possession of the premises but for the foreclosure of a mortgage on the property, shall be ordered sealed and shall not be disclosed to any person, other than a law enforcement officer or any other representative of a governmental entity, except upon further order of the court.

(i) Right to rent.

(1) Notwithstanding any other provision of law or contract, no mortgagee, receiver, holder of a certificate of sale, holder of the deed issued pursuant to that certificate, or if no certificate or deed was issued, the purchaser at the sale entitled to take possession of mortgaged real estate under this Section shall take possession or seek to remove an eligible mortgagor from the mortgaged real estate without providing at least 30 days' written notice of the eligible mortgagor's right to rent as provided in subsection (c) of Section 15-1707.

(2) If a mortgagor has elected to occupy the mortgaged real estate as a tenant pursuant to Section 15-1707, the mortgagee, receiver, holder of a certificate of sale, holder of the deed issued pursuant to that certificate, or if no certificate or deed was issued, the purchaser at the sale entitled to take possession under this Section shall take possession subject to the tenancy created under Section 15-1707.

(3) A holder of a certificate of sale, holder of the deed issued pursuant to that certificate, or if no certificate or deed was issued, the purchaser at the sale entitled to take possession of the property under this Section may take possession of the property that is occupied pursuant to Section 15-1707 without providing notice as required under paragraph (1) of this subsection (i) if:

(A) the holder of a certificate of sale, holder of the deed issued pursuant to that certificate, or if no certificate or deed was issued, the purchaser at the sale entitled to take possession is not:

(i) the mortgagee or a subsidiary, parent, trustee, or agent of the mortgagee;

(ii) any other financial institution or its subsidiary, parent, trustee, or agent;

(iii) the Federal National Mortgage Association;

(iv) the Federal Home Loan Mortgage Corporation; or

(v) the Federal Deposit Insurance Corporation; and

(B) the holder of a certificate of sale, holder of the deed issued pursuant to that certificate, or if no certificate or deed was issued, the purchaser at the sale entitled to take possession under this Section provides written notice of the termination of the tenancy to the eligible mortgagor at least 30 days prior to the termination.

(Source: P.A. 95-262, eff. 1-1-08; 95-933, eff. 8-26-08; 96-60, eff. 7-23-09; 96-111, eff. 10-29-09; 96-1000, eff. 7-2-10.)

(735 ILCS 5/15-1707 new)

Sec. 15-1707. Right to rent.

(a) Definitions. For the purposes of this Section:

"Covered foreclosure proceeding" means a foreclosure proceeding with respect to an eligible mortgage under the Illinois Mortgage Foreclosure Law.

"Eligible mortgage" means a first or subordinate mortgage:

(1) on a property that:

(A) is a single family property located in this State;

(B) has been used as the principal residence of the eligible mortgagor for a period of not less than 2 years immediately preceding the initiation of the covered foreclosure proceeding involved; and

(C) had a purchase price, at the time purchased by the eligible mortgagor, that is (i) less than the median purchase price for residences that are located in the same metropolitan statistical area or, (ii) if the property is not located in a metropolitan statistical area or information for the area is not available, less than the median purchase price as determined according to information collected and made available by the National Association of Realtors for the area, or in this State, for the most recently completed month for which such information is available; and

(2) that was originated before July 1, 2007.

"Eligible mortgagor" means a mortgagor under an eligible mortgage.

"Financial institution" means any bank, savings bank, savings and loan association, credit union, mortgage broker, mortgage banker, licensee under the Consumer Installment Loan Act or the Sales Finance Agency Act, or a corporate fiduciary, subsidiary, affiliate, parent company, or holding company of any such licensee, or any institution involved in real estate financing that is regulated by State or federal law.

"Foreclosed property" means the single family property that is subject to the eligible mortgage being foreclosed under the Illinois Mortgage Foreclosure Law.

"Party entitled to possession" means the mortgagee, receiver, holder of a certificate of sale, holder of the deed issued pursuant to that certificate, or if no certificate or deed was issued, the purchaser at the sale entitled to take possession under Section 15-1701 of the real estate that was secured by an eligible mortgage.

"Single family property" means:

(1) a residential property consisting of one to 4 dwelling units;

(2) a dwelling unit in a condominium property together with an undivided interest in the common areas and facilities serving the property; or

(3) a dwelling unit in a multi-unit project for which purchase of stock or a membership interest entitles the purchaser to permanent occupancy of that unit.

(b) Right to rent subject to foreclosure. Notwithstanding any other provision of law, an eligible mortgagor under an eligible mortgage that is in foreclosure may, at the sole option of the eligible mortgagor, continue to occupy the foreclosed property as a tenant subject to the requirements of subsection (d) of this Section if the eligible mortgagor provides written notice to a party entitled to possession of his or her intention to exercise the right to rent within 30 days after the receipt of the notice described in subsection (c) of this Section.

(c) Notice of the right to rent. A party entitled to possession shall provide written notice of the eligible mortgagor's right to rent at least 30 days prior to taking possession of the property or seeking to remove the eligible mortgagor from the property. The notice shall:

(1) be headed in bold 14-point type "RIGHT TO RENT NOTICE";

(2) state the following in 14-point type: "YOUR PROPERTY IS CURRENTLY IN FORECLOSURE AND SUBJECT TO POSSESSION BY ................. PURSUANT TO STATE LAW, YOU HAVE THE RIGHT TO CONTINUE TO OCCUPY YOUR HOME AS A RENTER AT A FAIR MARKET RATE APPROVED BY THE COURT. TO EXERCISE YOUR RIGHT TO RENT, YOU MUST PROVIDE WRITTEN NOTICE OF YOUR INTENTION TO EXERCISE YOUR RIGHT TO RENT TO ................. AT ..................... WITHIN 30 DAYS AFTER THE RECEIPT OF THIS NOTICE.";

(3) include the name, address, and telephone number of the party entitled to possession;

(4) clearly set forth the terms of the tenancy under subsection (d) of this Section; and

(5) be sent by first class mail to the eligible mortgagor at the common address of the residential property securing the eligible mortgage.

(d) Terms of tenancy.

(1) Period of tenancy.

(A) The occupancy of a foreclosed property by an eligible mortgagor pursuant to this Section shall be under a periodic month-to-month tenancy that shall not be terminated unless:

(i) except as provided in subparagraph (B) of this paragraph (1), the property is sold and the purchaser or holder of the certificate of sale, holder of the deed issued pursuant to that certificate, or if no certificate or deed was issued, the purchaser at the sale entitled to take possession under Section 15-1701 provides written notice of the termination to the eligible mortgagor at least 30 days prior to the termination;

(ii) the tenancy is terminated pursuant to paragraph (3) of this subsection (d); or

(iii) the eligible mortgage has been reinstated pursuant to Section 15-1602.

(B) An eligible mortgagor may continue to occupy the foreclosed property as a tenant under this Section if the property is sold and the purchaser is any of the following:

(i) the mortgagee or a subsidiary, parent, trustee, or agent of the mortgagee;

(ii) any other financial institution or its subsidiary, parent, trustee, or agent;

(iii) the Federal National Mortgage Association;

(iv) the Federal Home Loan Mortgage Corporation; or

(v) the Federal Deposit Insurance Corporation.

(2) Responsibilities of eligible mortgagor. An eligible mortgagor who occupies a foreclosed property pursuant to this Section shall:

(A) timely pay rent on a monthly basis in an amount approved by the court pursuant to subsection (e) of this Section;

(B) use the property as his or her principal residence; and

(C) maintain the property in safe, habitable condition.

(3) Termination by party entitled to possession or eligible mortgagor.

(A) The party entitled to possession may terminate the tenancy of an eligible mortgagor for material breach but shall not have the authority, at will, to terminate the tenancy during the occupancy if the eligible mortgagor has met the requirements of paragraph (2) of this subsection (d). The party entitled to possession shall provide written notice of the termination to the eligible mortgagor at least 30 days prior to the termination. The notice shall include an explanation of the reason for termination.

(B) The eligible mortgagor occupying a foreclosed property under this Section may terminate the tenancy at will upon at least 30 days' written notice to the party entitled to possession.

(4) Failure to surrender possession. If an eligible mortgagor fails to surrender possession of the property upon termination of the tenancy, the party entitled to possession may seek possession of the property through an action for forcible entry and detainer or ejectment.

(e) Rental rate.

(1) Initial determination. The rent for a foreclosed property occupied under this Section shall be a fair market rate approved by the court overseeing the foreclosure of the eligible mortgage. The rent shall not be greater than the amount the eligible mortgagor was required to pay per month pursuant to the eligible mortgage subject to foreclosure.

(2) Redetermination. The party entitled to possession or the eligible mortgagor may request that the court redetermine the fair market rent for the foreclosed property in the same manner provided under paragraph (1) of this subsection (e), except that no such redetermination shall be made pursuant to this subsection (e) before the expiration of the 12-month period beginning upon the most recent redetermination conducted at the request of the same party.

(f) Payment for maintenance of property. If a tenancy under this Section is terminated due to the sale of the property, the eligible mortgagor shall receive 5% of the purchase price unless the eligible mortgagor has:

(1) occupied the property as a tenant under this Section for less than 12 months;

(2) failed to maintain the property in safe, habitable condition during the tenancy; or

(3) caused substantial damage to the property during the tenancy.

(g) Construction. This Section shall not be construed to delay, or otherwise modify, affect, or alter any right of a creditor under an eligible mortgage to foreclose on an eligible mortgage and to sell the foreclosed property in connection with such foreclosure, except that the right of any owner of the property to possession of the property shall be subject to the leasehold interest established pursuant to this Section.

(h) Applicability and sunset.

(1) This Section shall apply to any covered foreclosure proceeding that has not been finally adjudicated as of the effective date of this amendatory Act of the 97th General Assembly.

(2) This Section shall not apply to any foreclosure commenced after 5 years from the effective date of this amendatory Act of the 97th General Assembly.

Section 99. Effective date. This Act takes effect June 1, 2012.